PSC okays special power rate for Century, but without burden on other APCo customers

Tuesday

Oct 2, 2012 at 8:47 AMOct 9, 2012 at 12:42 PM

The West Virginia Public Service Commission has issued a decision in the case of the special power rate requested by Century Aluminum to restart its Ravenswood smelting plant. The decision came after over a month of deliberation and filing of briefs and letters of complaint and support.

Staff

The West Virginia Public Service Commission has issued a decision in the case of the special power rate requested by Century Aluminum to restart its Ravenswood smelting plant. The decision came after over a month of deliberation and filing of briefs and letters of complaint and support.

The PSC's order issued October 4 rejected, in part, Century's proposal for a special electricity rate from Appalachian Power Company (APCo), but did establish a special rate mechanism for Century that satisfies the policy goals of the West Virginia Legislature issued earlier this year, addresses the concerns of Century regarding the reopening of its Ravenswood smelter and balances the interests of APCo, its present and future customers and the state economy.

The special rate mechanism authorized by the PSC rejected Century's proposal to place the risk of revenue shorfalls on other APCo customers. It places the risk, instead, on Century, and requires Century and its parent company to enter into a corporate guarantee and undertaking with APCo to assure payment of any revenue shortfalls and to otherwise comply with the conditions of the order. If Century elects to go forward with the PSC-approved special rate mechanism, the company and APCo must enter into a contract and file it with the commission. The term of the contract will end December 31, 2021, or can be extended to be for a full 10-year period.

The special rate mechanism establishes a minimum cost-based rate that Century is ultimately obligated to pay; a cash payment rate (LME Rate) based on aluminum prices Century pays on a current monthly basis; and a tracking account to reflect revenue shortfalls or excess revenues generated when the LME rate is higher or lower than the minimum rate.

The fixed cost credit initially, on a month to month basis, relieves Century of an obligation to pay a $20 million per year portion of the fixed costs of APCo that are currently being paid by other ratepayers and under traditional rate design would be the responsibility of century on a going-forward basis if it restarts the smelter.

The tax credit passed by the Legislature allows APCo to be compensated for a portion of Century's power costs from coal company severance tax payments of up to $19.4 million per year.

Century would be billed at the minimum rate each month, but pay based on the LME rate. The differences between the monthly billings at at the LME rate and the monthly billings at the minimum rate will be recorded in a tracking account. When the monthly billing and payments by Century at the LME rate is below the monthly billing at the minimum rate, a negative amount will be recorded in the tracking account (revenue shortfall). When the monthly billing and payments by Century at the LME rate is above the monthly billing at the minimum rate, a positive amount will be recorded in the tracking account (excess revenue).

If at the end of the special rate mechanism, there is a positive balance in the tracking account, the first $200 million is to be used to reduce rates for APCo customers to reflect repayment of fixed cost credits. If the positive balance is greater than $200 million, the excess above $200 million will be split with 25 percent going to other customers of APCo and 75 percent going to Century.

If there is a negative balance in the tracking account at the end of the term of the special rate mechanism, Century or its parent corporation will be obligated to pay APCo the full balance, plus carrying charges accrued over the years. This will only occur if the aggregate LME rate billing (and payments by Century) over the term of the special rate mechanism do not equal the minimum rate billings (accrued payables by Century).

To qualify for the special rate, Century must have a contract demand of at least 50,000 kilowatts of electric power at its smelter under normal operating conditions. In addition, to allow APCo to qualify coal severance tax credits, Century must have a contract demand of at least 250,000 kilowatts of electric power under normal operating conditions. Century expects to operate a lower demand level than in the past because it will not operate its carbon plant. Century still expects to have a demand of 310,000 kilowatts.

To qualify for the special rate, Century must create and retain at least 25 full-time jobs. To allow APCo to qualify coal severance tax credits, Century must employ no less than 300 persons. Century expect to employ approximately 421 employees even before it starts up the first potline and increase that number to 472 during its sequenced restart and stabilization period, and maintain that level of employees during its steady state operations after start-up.

Century must have no less than $500,000 invested in fixed assets including machinery and equipment. After it acquired the plant in 1995, Century added $22 million for pot tending cranes, $8.4 million for an anode cleaning facility and $6.3 million for a sow casting facility. In the three years prior to the curtailment, Century invested $18 million in capital projects at the plant. Century projects a capital expenditure of $16.2 million during the startup period and an additions $4 million in capital expenditures per year. Century has committed to invest $90 million at the startup of the Ravenswood plant including $40.5 million for operational readiness, $39.5 million for raw materials and $9.1 million for initial modernization. It also plans to invest $44 million in years 2-9 of operation. Century would be billed at the minimum rate each month, but pay based on the LME rate. The differences between the monthly billings at at the LME rate and the monthly billings at the minimum rate will be recorded in a tracking account. When the monthly billing and payments by Century at the LME rate is below the monthly billing at the minimum rate, a negative amount will be recorded in the tracking account (revenue shortfall). When the monthly billing and payments by Century at the LME rate is above the monthly billing at the minimum rate, a positive amount will be recorded in the tracking account (excess revenue).If at the end of the special rate mechanism, there is a positive balance in the tracking account, the first $200 million is to be used to reduce rates for APCo customers to reflect repayment of fixed cost credits. If the positive balance is greater than $200 million, the excess above $200 million will be split with 25 percent going to other customers of APCo and 75 percent going to Century.If there is a negative balance in the tracking account at the end of the term of the special rate mechanism, Century or its parent corporation will be obligated to pay APCo the full balance, plus carrying charges accrued over the years. This will only occur if the aggregate LME rate billing (and payments by Century) over the term of the special rate mechanism do not equal the minimum rate billings (accrued payables by Century). To qualify for the special rate, Century must have a contract demand of at least 50,000 kilowatts of electric power at its smelter under normal operating conditions. In addition, to allow APCo to qualify coal severance tax credits, Century must have a contract demand of at least 250,000 kilowatts of electric power under normal operating conditions. Century expects to operate a lower demand level than in the past because it will not operate its carbon plant. Century still expects to have a demand of 310,000 kilowatts.To qualify for the special rate, Century must create and retain at least 25 full-time jobs. To allow APCo to qualify coal severance tax credits, Century must employ no less than 300 persons.

Century expect to employ approximately 421 employees even before it starts up the first potline and increase that number to 472 during its sequenced restart and stabilization period, and maintain that level of employees during its steady state operations after start-up.

Century must have no less than $500,000 invested in fixed assets including machinery and equipment. After it acquired the plant in 1995, Century added $22 million for pot tending cranes, $8.4 million for an anode cleaning facility and $6.3 million for a sow casting facility. In the three years prior to the curtailment, Century invested $18 million in capital projects at the plant.

Century projects a capital expenditure of $16.2 million during the start-up period and an additions $4 million in capital expenditures per year.

Century has committed to invest $90 million at the start-up of the Ravenswood plant including $40.5 million for operational readiness, $39.5 million for raw materials and $9.1 million for initial modernization. It also plans to invest $44 million in years 2-9 of operation.

The West Virginia Public Service Commission has issued a decision in the case of the special power rate requested by Century Aluminum to restart its Ravenswood smelting plant. The decision came after over a month of deliberation and filing of briefs and letters of complaint and support.

The PSC's order issued October 4 rejected, in part, Century's proposal for a special electricity rate from Appalachian Power Company (APCo), but did establish a special rate mechanism for Century that satisfies the policy goals of the West Virginia Legislature issued earlier this year, addresses the concerns of Century regarding the reopening of its Ravenswood smelter and balances the interests of APCo, its present and future customers and the state economy.

The special rate mechanism authorized by the PSC rejected Century's proposal to place the risk of revenue shorfalls on other APCo customers. It places the risk, instead, on Century, and requires Century and its parent company to enter into a corporate guarantee and undertaking with APCo to assure payment of any revenue shortfalls and to otherwise comply with the conditions of the order. If Century elects to go forward with the PSC-approved special rate mechanism, the company and APCo must enter into a contract and file it with the commission. The term of the contract will end December 31, 2021, or can be extended to be for a full 10-year period.

The special rate mechanism establishes a minimum cost-based rate that Century is ultimately obligated to pay; a cash payment rate (LME Rate) based on aluminum prices Century pays on a current monthly basis; and a tracking account to reflect revenue shortfalls or excess revenues generated when the LME rate is higher or lower than the minimum rate.

The fixed cost credit initially, on a month to month basis, relieves Century of an obligation to pay a $20 million per year portion of the fixed costs of APCo that are currently being paid by other ratepayers and under traditional rate design would be the responsibility of century on a going-forward basis if it restarts the smelter.

The tax credit passed by the Legislature allows APCo to be compensated for a portion of Century's power costs from coal company severance tax payments of up to $19.4 million per year.

Century would be billed at the minimum rate each month, but pay based on the LME rate. The differences between the monthly billings at at the LME rate and the monthly billings at the minimum rate will be recorded in a tracking account. When the monthly billing and payments by Century at the LME rate is below the monthly billing at the minimum rate, a negative amount will be recorded in the tracking account (revenue shortfall). When the monthly billing and payments by Century at the LME rate is above the monthly billing at the minimum rate, a positive amount will be recorded in the tracking account (excess revenue).

If at the end of the special rate mechanism, there is a positive balance in the tracking account, the first $200 million is to be used to reduce rates for APCo customers to reflect repayment of fixed cost credits. If the positive balance is greater than $200 million, the excess above $200 million will be split with 25 percent going to other customers of APCo and 75 percent going to Century.

If there is a negative balance in the tracking account at the end of the term of the special rate mechanism, Century or its parent corporation will be obligated to pay APCo the full balance, plus carrying charges accrued over the years. This will only occur if the aggregate LME rate billing (and payments by Century) over the term of the special rate mechanism do not equal the minimum rate billings (accrued payables by Century).

To qualify for the special rate, Century must have a contract demand of at least 50,000 kilowatts of electric power at its smelter under normal operating conditions. In addition, to allow APCo to qualify coal severance tax credits, Century must have a contract demand of at least 250,000 kilowatts of electric power under normal operating conditions. Century expects to operate a lower demand level than in the past because it will not operate its carbon plant. Century still expects to have a demand of 310,000 kilowatts.

To qualify for the special rate, Century must create and retain at least 25 full-time jobs. To allow APCo to qualify coal severance tax credits, Century must employ no less than 300 persons. Century expect to employ approximately 421 employees even before it starts up the first potline and increase that number to 472 during its sequenced restart and stabilization period, and maintain that level of employees during its steady state operations after start-up.

Century must have no less than $500,000 invested in fixed assets including machinery and equipment. After it acquired the plant in 1995, Century added $22 million for pot tending cranes, $8.4 million for an anode cleaning facility and $6.3 million for a sow casting facility. In the three years prior to the curtailment, Century invested $18 million in capital projects at the plant. Century projects a capital expenditure of $16.2 million during the startup period and an additions $4 million in capital expenditures per year. Century has committed to invest $90 million at the startup of the Ravenswood plant including $40.5 million for operational readiness, $39.5 million for raw materials and $9.1 million for initial modernization. It also plans to invest $44 million in years 2-9 of operation. Century would be billed at the minimum rate each month, but pay based on the LME rate. The differences between the monthly billings at at the LME rate and the monthly billings at the minimum rate will be recorded in a tracking account. When the monthly billing and payments by Century at the LME rate is below the monthly billing at the minimum rate, a negative amount will be recorded in the tracking account (revenue shortfall). When the monthly billing and payments by Century at the LME rate is above the monthly billing at the minimum rate, a positive amount will be recorded in the tracking account (excess revenue).If at the end of the special rate mechanism, there is a positive balance in the tracking account, the first $200 million is to be used to reduce rates for APCo customers to reflect repayment of fixed cost credits. If the positive balance is greater than $200 million, the excess above $200 million will be split with 25 percent going to other customers of APCo and 75 percent going to Century.If there is a negative balance in the tracking account at the end of the term of the special rate mechanism, Century or its parent corporation will be obligated to pay APCo the full balance, plus carrying charges accrued over the years. This will only occur if the aggregate LME rate billing (and payments by Century) over the term of the special rate mechanism do not equal the minimum rate billings (accrued payables by Century). To qualify for the special rate, Century must have a contract demand of at least 50,000 kilowatts of electric power at its smelter under normal operating conditions. In addition, to allow APCo to qualify coal severance tax credits, Century must have a contract demand of at least 250,000 kilowatts of electric power under normal operating conditions. Century expects to operate a lower demand level than in the past because it will not operate its carbon plant. Century still expects to have a demand of 310,000 kilowatts.To qualify for the special rate, Century must create and retain at least 25 full-time jobs. To allow APCo to qualify coal severance tax credits, Century must employ no less than 300 persons.

Century expect to employ approximately 421 employees even before it starts up the first potline and increase that number to 472 during its sequenced restart and stabilization period, and maintain that level of employees during its steady state operations after start-up.

Century must have no less than $500,000 invested in fixed assets including machinery and equipment. After it acquired the plant in 1995, Century added $22 million for pot tending cranes, $8.4 million for an anode cleaning facility and $6.3 million for a sow casting facility. In the three years prior to the curtailment, Century invested $18 million in capital projects at the plant.

Century projects a capital expenditure of $16.2 million during the start-up period and an additions $4 million in capital expenditures per year.

Century has committed to invest $90 million at the start-up of the Ravenswood plant including $40.5 million for operational readiness, $39.5 million for raw materials and $9.1 million for initial modernization. It also plans to invest $44 million in years 2-9 of operation.

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